Correlation Between F M and Farmers Bank
Can any of the company-specific risk be diversified away by investing in both F M and Farmers Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining F M and Farmers Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between F M Bank and The Farmers Bank, you can compare the effects of market volatilities on F M and Farmers Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in F M with a short position of Farmers Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of F M and Farmers Bank.
Diversification Opportunities for F M and Farmers Bank
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FMBM and Farmers is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding F M Bank and The Farmers Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bank and F M is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on F M Bank are associated (or correlated) with Farmers Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Bank has no effect on the direction of F M i.e., F M and Farmers Bank go up and down completely randomly.
Pair Corralation between F M and Farmers Bank
Given the investment horizon of 90 days F M Bank is expected to generate 1.51 times more return on investment than Farmers Bank. However, F M is 1.51 times more volatile than The Farmers Bank. It trades about 0.02 of its potential returns per unit of risk. The Farmers Bank is currently generating about 0.01 per unit of risk. If you would invest 1,909 in F M Bank on November 1, 2024 and sell it today you would earn a total of 83.00 from holding F M Bank or generate 4.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 86.47% |
| Values | Daily Returns |
F M Bank vs. The Farmers Bank
Performance |
| Timeline |
| F M Bank |
| Farmers Bank |
F M and Farmers Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with F M and Farmers Bank
The main advantage of trading using opposite F M and Farmers Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if F M position performs unexpectedly, Farmers Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Farmers Bank will offset losses from the drop in Farmers Bank's long position.The idea behind F M Bank and The Farmers Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Farmers Bank vs. CIB Marine Bancshares | Farmers Bank vs. F M Bank | Farmers Bank vs. ENB Financial Corp | Farmers Bank vs. First Bankers Trustshares |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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